Labor and Technology Costs

By Les Spielman

Is There An Equation Between Technology And Labor Costs?

Having been deeply involved in the technology side of the lodging & hospitality industry for more than 27 years, plus having the opportunity to visit practically every country and continent in the world, some very startling revalations about our industry recently became clear. They were strongly reinforced during my latest trips throughout the Pacific. I have visited this area of the world at least 75 times over the past 25 years. These realizations were the large dichotomy of technology usage throughout the Pacific.

In Hong Kong, Singapore, Australia, and New Zealand most medium to large properties are automated to the same extent as their counterparts in North America. All major chain properties, whether regional to the Pacific or with North American ties are as fully automated as their North American based cousins. However, when you start going to the outskirts of the major cities you will find that the small, medium and sometimes very large properties are not at all automated. The major hotels tend to stick to the very large cities. However, as my travels took me through smaller cities and “Third world countries” like China, Malaysia, Indochina, Indonesia, India, and most of the Philippines, I noticed that the use of technology was almost nil. My impressions for many years was that the cost of technology was too expensive for these regions. But, they were too expensive for not the reasons that you and I would consider. It was the cost of LOCAL labor! As an example, a front office clerk in China earns approximately US$37.50 a MONTH plus lunch (usually a bowl of rice with a little vegetable, NO meat). As the clerk progresses and gets some seniority, his or her wage usually rises to approximately US$43.75 per MONTH. At this stage some arrangement may be made for a small cot in dormitory type housing. Finally, as the clerk reaches the stage of supervisor or shift manager, his or her salary rises to US$50.00 a month!

With this type of labor rates, there is no cost justification for ANY type of automation. The ROI would be many, many years, no matter how inexpensive the technology/automation cost. In addition, many of these countries have so much unemployment that their governments have actually passed laws that state that the property must hire three people for each room, or three people for each guest! In addition to the automation and technology that we have become accustomed to, such very basic services as telephones and televisions don’t even exist. The reason . . . poor communications infrastructure. It is most important to realize that MOST of the above does NOT apply to the large regional and international chains. However, even though you pay the equivalent of US250.00 to US$300.00 per night at one of the chains, it is quite usual that you pay around US$00 .75ยข for a local call, and the equivalent of US$1.25 for ANY 800 type of “toll free” telephone call, even to their own reservations center.

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